Registration No. 333-_____
As filed with the Securities and Exchange Commission on January 11, 2002
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EasyLink Services Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 13-3787073
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
399 Thornall Street
Edison, NJ 08837
(732) 906-2000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
David W. Ambrosia, Esq.
Executive Vice President and General Counsel
EasyLink Services Corporation
399 Thornall Street
Edison, NJ 08837
(732) 906-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Ronald A. Fleming, Jr., Esq.
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, New York 10004
(212) 858-1143
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Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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Pursuant to Rule 429(a) of the Securities Act of 1933, as amended, a combined
prospectus is being used in this registration statement, and pursuant to Rule
429(b) of the Securities Act of 1933, as amended, the earlier registration
statements to which the combined prospectus relates are the Company's, Form S-3
Registration Statement filed on July 11, 2000, as amended on August 2, 2000
(Registration File No. 333-41156), Form S-3 Registration Statement filed on
August 4, 2000 (Registration File No. 333-43060) and Form S-3 Registration
Statement filed on April 27, 2001, as amended on May 22, 2001 (Registration File
No. 333-59776).
CALCULATION OF REGISTRATION FEE
========================= ================= ====================== ======================= ==================
Title of each class of Proposed maximum Proposed maximum Amount of
securities to be Amount to be offering price per aggregate offering registration
registered registered(1)(2) unit(3) price(3) fee(3)
Class A Common Stock,
par value $0.01 104,013,832 $ 0.56 $ 58,247,746 $ 13,921
per share
========================= ================= ====================== ======================= ==================
(1) Includes 39,553,116 shares issuable upon conversion of outstanding
senior convertible notes or issuable in payment of a portion of the
interest on such notes or issuable upon exercise of outstanding
warrants. The notes are convertible into, and the warrants are
exercisable for, shares of Class A common stock, $0.01 par value per
share, of EasyLink Services Corporation at various conversion or
exercise prices, each of which is subject to adjustment under certain
circumstances. This registration statement includes such additional
shares of Class A common stock as may be issuable pursuant to such
adjustments.
(2) Pursuant to Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the prospectus which constitutes
part of this registration statement also relates to the remaining
43,078,639 shares of common stock registered on Form S-3 (File No.
333-59776), Form S-3 (File No. 333-43060) and Form S-3 (File No.
333-41156), which registration statements are still effective. Filing
fees of $6,913.11, $240.58 and $1,165.73, respectively, were previously
paid for the registration of those 43,078,639 shares.
(3) Estimated in accordance with Rule 457(c) under the Securities Act
solely for the purpose of computing the registration fee based upon the
average of the high and low prices of the Class A common stock on
January 9, 2002, as quoted on the Nasdaq National Market.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
The information in this prospectus is not complete and may be changed. We may
not sell these securities until a registration statement relating to these
securities filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject to Completion, Dated January 11, 2002
PROSPECTUS
147,092,461 Shares
EasyLink Services Corporation
Class A common stock
----------------
This prospectus relates to the offering of our Class A common stock held by
selling stockholders or issuable upon conversion of or in payment of a portion
of the interest on our outstanding senior convertible notes held by other
selling stockholders. The selling stockholders may sell the shares from time to
time. We will pay certain of the expenses of this offering; however, except with
respect to 185,686 of the shares covered by this prospectus, EasyLink Services
is not responsible for the cost of brokerage commissions and discounts. We will
not receive any proceeds from the sale of shares by the selling stockholders.
The selling stockholders may offer and sell all of the shares in the
over-the-counter market or on one or more exchanges. The selling stockholders
may sell the shares at the then prevailing market price for the shares or in
negotiated transactions.
Our Class A common stock is listed on the Nasdaq National Market under the
symbol "EASY." On January 10, 2002, the closing price of our Class A common
stock on the Nasdaq National Market was $.56 per share.
This investment involves risk. You should purchase only if you can afford a
complete loss. See "Risk Factors" beginning on page 6.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is January , 2002
TABLE OF CONTENTS
Page
Incorporation of Documents By Reference.................................. 2
Where You Can Get More Information....................................... 3
Cautionary Statements Regarding Forward-Looking Statements............... 3
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 21
Description of Capital Stock............................................. 21
Selling Stockholders..................................................... 24
Plan of Distribution..................................................... 30
Legal Matters............................................................ 31
Experts.................................................................. 31
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, the Class A common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or the date of any sale of the Class A common stock.
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Information contained on our Web sites will not be deemed to be part of this
prospectus.
----------------
INCORPORATION OF DOCUMENTS BY REFERENCE
We furnish our stockholders with annual reports containing audited financial
statements and other appropriate reports. We also file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. Instead of repeating in this prospectus information that we
have already filed with the Securities and Exchange Commission, rules of the
Securities and Exchange Commission permit us to "incorporate by reference" the
information we file with them. These rules mean that we can disclose important
information to you by referring you to those documents that we have previously
filed with the Securities and Exchange Commission. These documents are
considered to be part of this prospectus. Any documents that we file with the
Securities and Exchange Commission in the future will also be considered to be
part of this prospectus and will automatically update and supersede the
information in this prospectus. We incorporate by reference the documents listed
below and any future filings we make with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the selling stockholders sell all of the Class A common stock offered by
this prospectus.
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, filed with the Commission on April 2, 2001;
o Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2001, June 30, 2000 and September 30, 2000;
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o Our Current Reports on Form 8-K and all amendments thereto on Form
8-K/A filed with the Commission on August 23, 1999, November 3, 1999,
February 11, 2000, March 28, 2000, April 24, 2000, May 26, 2000,
January 10, 2001, January 17, 2001, February 7, 2001, February 8, 2001,
February 13, 2001, February 26, 2001, March 9, 2001, March 26, 2001,
May 9, 2001, May 18, 2001, June 1, 2001, July 24, 2001, October 1,
2001, October 2, 2001 and November 30, 2001.
o Our Definitive Proxy Statement filed on April 27, 2001.
WHERE YOU CAN GET MORE INFORMATION
We have filed a registration statement with the Securities and Exchange
Commission to register the Class A common stock that the selling stockholders
are offering to you. This prospectus is part of that registration statement. As
allowed by the Securities and Exchange Commission's rules, we have not included
in this prospectus all of the information that is included in the registration
statement. At your oral or written request, we will provide to you, without
charge, a copy of the registration statement or any of the exhibits to the
registration statement or any or all of the other information that has been
incorporated by reference in this prospectus but not delivered with this
prospectus. If you want more information, write or call us at:
EasyLink Services Corporation
399 Thornall Street
Edison, NJ 08837
Telephone: (732) 906-2000
Attention: Investor Relations
You may also obtain a copy of any filing we have made with the Securities
and Exchange Commission directly from the Securities and Exchange Commission.
You may either:
o read and copy reports, proxy and information statements or other
information we have filed with the Securities and Exchange Commission
at the Securities and Exchange Commission's public reference room at
450 Fifth Street N.W., Washington, D.C. 20549 or
o obtain copies of reports, proxy and information statements and other
information that we have filed with the Securities and Exchange
Commission on the Securities and Exchange Commission's Internet web
site at http://www.sec.gov.
You can get more information about the Securities and Exchange Commission's
public reference room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements within the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 throughout this prospectus.
These statements relate to our future plans, objectives, expectations and
intentions. These statements may be identified by the use of words such as
"expects," "anticipates," "intends," "believes," "estimates," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed in the "Risk Factors" section
of this prospectus.
3
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This is not intended to be a complete description
of the matters covered in this prospectus and is subject to and qualified in its
entirety by reference to the more detailed information and financial statements,
including the notes thereto, appearing elsewhere or incorporated by reference in
this prospectus.
Our company
EasyLink Services Corporation, formerly Mail.com, Inc., is a leading global
provider of outsourced messaging services to enterprises and service providers.
EasyLink combines the businesses of Mail.com Business Messaging Services, Swift
Telecommunications, Inc. and the Easylink Services business acquired from AT&T
Corp. by Swift Telecommunications. As a result of this combination, we offer a
comprehensive portfolio of messaging services to thousands of business customers
worldwide including the majority of the Fortune 500. By leveraging these
relationships, we believe that we are positioned to grow in both of the major
sectors of the messaging services industry.
Through continued expansion of our messaging services lines of business and
selling multiple services to our large customer base, we seek to establish a
position in the emerging managed and hosted e-mail markets while expanding our
already established position in the message delivery services market. Because
the essential communications computer network companies need to do business in
today's 24x7x365 environment is common across all messaging services, EasyLink
is further positioned to benefit from the scale this business combination
created.
Our services include:
o e-mail and groupware services through which we host and operate on our
premises our customer's e-mail and groupware systems such as Microsoft
Exchange, Novell GroupWise and other Internet e-mail services which
allow users to send and receive their e-mail from any location
connected to the Internet;
o virus protection, unsolicited e-mail or spam control and content
filtering services that protect a customer's e-mail system from
messages before they enter or leave the corporate network;
o message delivery services such as electronic data interchange or "EDI,"
telex, desktop fax, broadcast messaging and production messaging
services; and
o professional services such as managed messaging services support,
on-site messaging applications management, help desk and staff
augmentation services.
We provide services on a managed basis that enable our customers to provide
e-mail and groupware, virus protection, spam control and content filtering and
message delivery services to their customers or employees. We derive revenue
from license fees, monthly per-user fees, per-message charges, per-minute
charges and consulting fees.
4
Other operations
We previously operated an advertising network business. On October 26, 2000,
we announced our intention to sell this business to focus exclusively on our
established outsourced messaging business. On March 30, 2001, we completed the
sale of the advertising network business to Net2Phone, Inc. Included in the sale
were our rights to provide e-mail-based advertising and permission marketing
solutions to advertisers, as well as our rights to provide e-mail services
directly to consumers at the www.mail.com Web site and in partnership with other
Web sites.
In March 2000, we formed WORLD.com, Inc. to develop the Company's portfolio
of domain names into independent Web properties, and subsequently acquired or
formed its subsidiaries Asia.com, Inc. and India.com, Inc. in which WORLD.com is
the majority owner. In November 2000, the Company announced its intention to
sell all assets not related to its core outsourced messaging business, including
Asia.com, Inc., India.com, Inc. and its portfolio of domain names. On May 3,
2001, our majority-owned subsidiary Asia.com, Inc. completed the sale of its
business to an investor group. In October 2001, we sold a subsidiary of
India.com, Inc. and entered into an agreement to sell the portal operations of
India.com, Inc. We subsequently terminated the agreement to sell the portal
operations of India.com, Inc. and have ceased conducting its portal business.
We are a Delaware corporation. Our principal executive offices are located
at 399 Thornall Street, Edison, NJ 08837. Our phone number is (732) 906-2000.
5
RISK FACTORS
Before you invest in our Class A common stock, you should carefully consider
the risks described below and the other information included or incorporated by
reference in this prospectus.
We have only a limited operating history, we are involved in a new and unproven
industry and we have determined to focus on our core outsourced messaging
business.
We have only a limited operating history upon which you can evaluate our
business and our prospects. We have offered a commercial email service since
November 1996 under the name iName. We changed our company name to Mail.com,
Inc. in January 1999. In February 2000, we acquired NetMoves Corporation, a
provider of a variety of Internet message delivery services to businesses. In
March 2000, we formed WORLD.com to develop and operate our domain name
properties as independent Web sites. In the fourth quarter of 2000, we announced
our intention to focus exclusively on our outsourced messaging business and to
sell all assets not related to this business. In February 2001, we acquired
Swift Telecommunications, Inc. which had contemporaneously acquired the EasyLink
Services business from AT&T Corp. The EasyLink Services business is a provider
of outsourced e-mail services and of message delivery services such as
electronic data interchange or EDI, fax services and telex services. Swift is a
provider of telex services. On March 30, 2001, we announced that we had sold our
advertising network business to Net2Phone, Inc. and on May 3, 2001 our Asia.com,
Inc. subsidiary completed the sale of its business. In October 2001, we sold a
subsidiary of India.com, Inc. and have since ceased the conduct of the portal
operations of India.com, Inc. Our success will depend in part upon our ability
to maintain or expand our sales of message delivery services such as EDI and fax
services to enterprises, the development of a viable market for fee-based e-mail
and groupware services on an outsourced basis, our ability to compete
successfully in those markets and our ability to successfully sell our non-core
assets on favorable terms. For the reasons discussed in more detail below, there
are substantial obstacles to our achieving and sustaining profitability.
We have incurred losses since inception.
We have not achieved profitability in any period, and we may not be able to
achieve or sustain profitability. We incurred a net loss of $143.5 million for
the first nine months of 2001 and $229.5 million for the year ended December 31,
2000. We had an accumulated deficit of $450.7 million as of September 30, 2001.
We intend to expand our sales and marketing operations, upgrade and enhance our
technology, continue our international expansion, and improve and expand our
management information and other internal systems. We intend to continue to make
strategic acquisitions and investments, which may result in significant
amortization of intangibles and other expenses or a later impairment charge
arising out of the write-off of goodwill booked as a result of such
acquisitions or investments. We are making these expenditures in anticipation of
higher revenues, but there will be a delay in realizing higher revenues even if
we are successful. If we do not succeed in substantially increasing our revenues
or integrating the EasyLink Services and Swift businesses with our historical
business, our losses may continue.
If we are unable to raise necessary capital in the future, we may be unable to
invest in the growth of our business or fund necessary expenditures.
We anticipate the need to raise additional capital in the future. See Part
I. Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - contained in our
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000
and subsequent reports filed with the Securities and Exchange Commission. At
September 30, 2001, we had $11.1 million of cash and cash equivalents and
$20,000 of marketable securities. Our principal commitments consist of
subordinated convertible notes, senior convertible notes, notes payable,
obligations under capital leases, domain asset purchase obligations, accounts
payable and other current obligations and commitments for capital expenditures.
For the year ended December 31, 2000, we received a report from our independent
accountants containing an explanatory paragraph stating that we suffered
recurring losses from operations since inception and have a working capital
deficiency that raise substantial doubt about our ability to continue as a going
concern. We believe that we will need additional financing to invest in the
growth of our business and to pay other obligations, and the availability of
such financing when needed, on terms acceptable to us, or if at all, is
uncertain. See "Risk Factors - We May Be Unable to Pay Debt Service on Our
Indebtedness for Money Borrowed and Other Obligations." If we are unable to
raise additional financing or generate sufficient cash flow, we may be unable to
continue as a going concern.
6
If we raise additional funds by issuing equity securities or debt
convertible into equity securities, stockholders may experience dilution of
their ownership interest. The amount of dilution resulting from issuance of
additional shares of Class A common stock and securities convertible into Class
A common stock and the potential dilution that may result from future issuances
has significantly increased in light of the decline in our stock price.
Moreover, we could issue preferred stock that has rights senior to those of the
Class A common stock. Some of our stockholders have registration rights that
could interfere with our ability to raise needed capital. If we raise funds by
issuing debt, our lenders may place limitations on our operations, including our
ability to pay dividends.
We intend to sell all of our assets not related to our core outsourced messaging
business but may experience difficulty completing any or all of such sales on
favorable terms or at all.
In the fourth quarter of 2000, we announced our intention to sell all of our
non-core assets, including our advertising network business, our Asia.com, Inc.
and India.com, Inc. subsidiaries and our portfolio of Internet domain names. On
March 30, 2001, we completed the sale of our advertising network business to
Net2Phone. On May 3, 2001, our Asia.com, Inc. subsidiary completed the sale of
its business. In October 2001, we sold a subsidiary of India.com, Inc. and have
since ceased conducting the portal business of India.com, Inc. We cannot assure
you that we will be able to sell all or any of our remaining non-core assets on
favorable terms or at all. We also cannot assure you as to the timing or the
terms and conditions of the sale of any of these assets or the form or amount of
consideration (if any) that may be received. The realizable value of these
assets may ultimately prove to be less than the carrying value currently
reflected in our consolidated financial statements. Moreover, if the sales are
not successfully completed, the market price of our common stock may decline to
the extent that the current market price reflects a market assumption that such
sales will be successfully completed. To the extent that we receive non-cash
consideration in any of these sales, we may not be able to liquidate this
consideration or otherwise turn it into cash for a period of time after we
receive it or at all.
We intend to continue to acquire, or make strategic investments in, other
businesses and acquire or license technology and other assets and we may have
difficulty integrating these businesses or generating an acceptable return.
We have completed a number of acquisitions and strategic investments since
our initial public offering. For example, we acquired NetMoves Corporation, a
provider of a variety of message delivery services to businesses, and The
Allegro Group, Inc., a provider of email and email related services, such as
virus blocking and content screening, to businesses. We also acquired Swift
Telecommunications, Inc. and the EasyLink Services business that it had
contemporaneously acquired from AT&T Corp. We will continue our efforts to
acquire or make strategic investments in businesses and to acquire or license
technology and other assets, and any of these acquisitions may be material to
us. We cannot assure you that acquisition or licensing opportunities will
continue to be available on terms acceptable to us or at all. Such acquisitions
involve risks, including:
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o inability to raise the required capital;
o difficulty in assimilating the acquired operations and personnel;
o inability to retain any acquired member or customer accounts;
o disruption of our ongoing business;
o the need for additional capital to fund losses of acquired businesses;
o inability to successfully incorporate acquired technology into our
service offerings and maintain uniform standards, controls, procedures
and policies; and
o lack of the necessary experience to enter new markets.
We may not successfully overcome problems encountered in connection with
potential acquisitions. In addition, an acquisition could materially impair our
operating results by diluting our stockholders' equity, causing us to incur
additional debt or requiring us to amortize acquisition expenses and acquired
assets or to incur impairment charges as a result of the write-off of goodwill
booked as a result of such acquisition.
We may be unable to successfully complete the integration of the EasyLink
Services Business acquired from AT&T.
On February 23, 2001, we completed the acquisition of Swift
Telecommunications, Inc. which had contemporaneously acquired the EasyLink
Services business of AT&T Corp. The EasyLink Services business acquired from
AT&T provides a variety of messaging services such as e-mail, EDI, fax and telex
services. This business was a division of AT&T and was not a separate
independent operating entity. We hired only a portion of the employees of the
business.
Under a Transition Services Agreement entered into in connection with the
acquisition, AT&T agreed to provide us with a variety of services to enable us
to continue to operate the business pending the transition to EasyLink. See
"Part I. Item 1. Business - Transition Services Agreement and Master Carrier
Agreement with AT&T Corp." in our Form 10-K for the year ended December 31, 2000
filed on April 2, 2001. We have transitioned many of these services provided by
AT&T under the Transition Services Agreement to ourselves, including customer
service, network operations center, telex switching equipment and services and
office space in a variety of locations. However, the messaging network for the
portion of this business relating to EDI, fax and email services continues to
reside on AT&T's managed network and is being operated and maintained for
EasyLink by AT&T pursuant to the Transition Services Agreement. We plan to
migrate off the AT&T network to the EasyLink network over the next two years.
We cannot assure you that we will be able to successfully transition the
remaining EasyLink Services network and other operations from AT&T to us, or
successfully integrate them into our operations, in a timely manner or without
incurring substantial unforeseen expense. Even if successfully transitioned and
integrated, we may be unable to operate the business at expense levels that are
ultimately profitable for us. We cannot assure you that we will be able to
retain all of the customers of the EasyLink Services business. Our inability to
successfully transition, integrate or operate the network and operations, or to
retain customers, of the EasyLink Services business will result in a material
adverse effect on our business, results of operations and financial condition.
8
We have incurred significant indebtedness for money borrowed.
As of September 30, 2001, we had approximately $134.6 million principal
amount of outstanding indebtedness for borrowed money and capital leases. On a
pro forma basis after giving effect to our debt restructuring completed on
November 27, 2001, as of September 30, 2001, we had approximately $97 million
principal amount of such outstanding indebtedness and capital leases. We may
incur substantial additional indebtedness in the future. The level of our
indebtedness, among other things, could (1) make it difficult for us to make
payments on our indebtedness, (2) make it difficult to obtain any necessary
financing in the future for working capital, capital expenditures, debt service
requirements or other purposes, (3) limit our flexibility in planning for, or
reacting to changes in, our business, and (4) make us more vulnerable in the
event of a downturn in our business.
We may be unable to pay debt service on our indebtedness for money borrowed and
other obligations.
We had an operating loss and negative cash flow during the first nine months
of 2001 and for the year ended December 31, 2000. In addition, we have a
substantial amount of outstanding accounts payable and other obligations.
Accordingly, cash generated by our operations would have been insufficient to
pay the amount of interest payable annually on our outstanding indebtedness or
to pay our other obligations. We cannot assure you that we will be able to pay
interest and other amounts due on our outstanding indebtedness, or our other
obligations, on the scheduled dates or at all. If our cash flow and cash
balances are inadequate to meet our obligations, we could face substantial
liquidity problems. If we are unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments, or if we otherwise
fail to comply with any covenants in our indebtedness, we would be in default
under these obligations, which would permit these lenders to accelerate the
maturity of the obligations and could cause defaults under our indebtedness. Any
such default could have a material adverse effect on our business, results of
operations and financial condition. We cannot assure you that we would be able
to repay amounts due on our indebtedness if payment of the indebtedness were
accelerated following the occurrence of an event of default under, or certain
other events specified in, the agreements governing our outstanding indebtedness
and capital leases, including any deemed sale of all or substantially all of our
assets.
Outsourcing of e-mail and groupware services and message delivery services may
not prove to be viable businesses.
An important part of our business strategy is to leverage our existing
global customer base and global network by continuing to provide the best
message delivery services today and by offering these customers managed e-mail
and other messaging services in the future. The market for managed e-mail,
groupware services and other messaging services such as virus protection, spam
control and content filtering services and professional messaging services is
only beginning to develop. Our success will depend on the continued expansion of
the market for outsourced message delivery services such as EDI and fax services
and the development of viable markets for the outsourcing of managed e-mail and
groupware services, services to protect corporate e-mail systems from viruses,
spam and offensive content and related professional messaging services. Each of
these developments is somewhat speculative.
9
There are significant obstacles to the development of a sizable market for
messaging services outsourcing. Outsourcing is one of the principal methods by
which we will attempt to reach the size we believe is necessary to be
successful. Security and the reliability of the Internet, however, are likely to
be of concern to enterprises and service providers deciding whether to outsource
their messaging services or to continue to provide it themselves. These concerns
are likely to be particularly strong at larger businesses and service providers,
which are better able to afford the costs of maintaining their own systems.
While we intend to focus exclusively on our outsourced messaging services, we
cannot be sure that we will be able to maintain or expand our business customer
base or that we will be able to sell managed messaging services such as e-mail
and groupware hosting services, virus protection, spam control or content
filtering services or professional services to this customer base. In addition,
the sales cycle for managed messaging services such as hosting services is
lengthy and could delay our ability to generate revenues in the managed
messaging services market. As part of our business strategy, we plan to offer
additional outsourced messaging and other services to existing customers. We
cannot assure you that these customers will purchase these services or will
purchase them at prices that we wish to charge. Furthermore, we may not be able
to generate significant additional revenues by providing our outsourced e-mail
and groupware services to businesses. Standards for pricing in the business
e-mail and groupware services market are not yet well defined and some
businesses and service providers may not be willing to pay the fees we wish to
charge. We cannot assure you that the fees we intend to charge will be
sufficient to offset the related costs of providing these services.
We may fail to meet market expectations because of fluctuations in our quarterly
operating results, which would cause our stock price to decline.
Although we intend to steadily increase our spending and investment to
support our planned growth, our revenues (and some of our costs) will be much
less predictable. This is likely to result in significant fluctuations in our
quarterly results, and to limit the value of quarter-to-quarter comparisons.
Because of our limited operating history, the emerging nature of our industry
and our planned sale of our non-core assets, we anticipate that securities
analysts will have difficulty in accurately forecasting our results. It is
likely that our operating results in some quarters will be below market
expectations. In this event, the price of our Class A common stock is likely to
decline.
The following are among the factors that could cause significant fluctuations in
our operating results:
o incurrence of other cash and non-cash accounting charges, including
charges resulting from acquisitions or dispositions of assets,
including from the disposition of non-core assets such as our Asia.com
and India.com subsidiaries, and write-downs of impaired assets;
o non-cash charges associated with repriced stock options;
o system outages, delays in obtaining new equipment or problems with
planned upgrades;
o disruption or impairment of the Internet;
o demand for outsourced messaging services;
o attracting and retaining customers and maintaining customer
satisfaction;
o introduction of new or enhanced services by us or our competitors;
o changes in our pricing policy or that of our competitors;
o changes in governmental regulation of the Internet and messaging in
particular; and
o general economic and market conditions.
10
Other such factors in our non-core businesses include:
o incurrence of additional expenditures without receipt of offsetting
revenues pending the sale of these businesses.
We may incur significant stock based compensation charges related to repriced
options.
In light of the decline in our stock price and in an effort to retain our
employee base, on November 14, 2000, the Company offered to certain of its
employees, officers and directors, other than Gerald Gorman, the right to
reprice certain outstanding stock options to an exercise price equal to $1.69
per share, the closing price of the Company's Class A common stock on NASDAQ on
November 14, 2000. Options to purchase 6,327,986 shares were repriced. The
repriced options vest at the same rate that they would have vested under their
original terms except that shares issuable upon exercise of these options may
not be sold until after November 14, 2001. In March 2000, Financial Accounting
Standards Board ("FASB") issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an interpretation of APB
Opinion No. 25" ("Interpretation"). Among other issues, this Interpretation
clarifies (a) the definition of employee for purposes of applying Opinion 25,
(b) the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. As a result, under the
Interpretation, stock options repriced after December 15, 1998 are subject to
variable plan accounting treatment. This guidance requires the Company to
remeasure compensation cost for outstanding repriced options each reporting
period based on changes in the market value of the underlying common stock.
Depending upon movements in the market value of the Company's common stock, this
accounting treatment may result in significant non-cash compensation charges in
future periods.
Several of our competitors have substantially greater resources, longer
operating histories, larger customer bases and broader product offerings.
Our business is, and we believe will continue to be, intensely competitive.
See "Part I Item 1 - Business - Competition" in our Form 10-K for the year ended
December 31, 2000 filed on April 2, 2001.
Many of our competitors have greater market presence, engineering and
marketing capabilities, and financial, technological and personnel resources
than those available to us. As a result, they may be able to develop and expand
their communications and network infrastructures more quickly, adapt more
swiftly to new or emerging technologies and changes in customer requirements,
take advantage of acquisition and other opportunities more readily, and devote
greater resources to the marketing and sale of their products and services. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their services to address the needs of our current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. In addition
to direct competitors, many of our larger potential customers may seek to
internally fulfill their messaging needs through the deployment of their own on
premises messaging systems.
Some of our competitors provide a variety of business services and products
such as Internet access and other telecommunications services, browser software,
homepage design, Web site hosting and software and hardware solutions in
addition to messaging services. The ability of these competitors to offer a
broader suite of complementary services may give them a considerable advantage
over us.
The level of competition is likely to increase as current competitors
increase the sophistication of their offerings and as new participants enter the
market. In the future, as we expand our service offerings, we expect to
encounter increased competition in the development and delivery of these
services. We may not be able to compete successfully against our current or
future competitors.
11
Our rapid expansion is straining our existing resources, and if we are not able
to manage our growth effectively, our business and operating results will
suffer.
We have aggressively expanded our operations in anticipation of continued
growth in our business and as a result of our acquisitions. We have also
developed the technology and infrastructure to offer a range of services in the
market for outsourced messaging services. At the same time, we announced our
intention to sell all of our non-core assets, including our advertising network
business, our World.com subsidiaries Asia.com and India.com and our portfolio of
domain names. This expansion and the decision to sell all of our non-core assets
has placed, and we expect it to continue to place, a significant strain on our
managerial, operational and financial resources. If we cannot manage our growth
or the sale of non-core assets effectively, our business, operating results and
financial condition will suffer.
It is difficult to retain key personnel and attract additional qualified
employees in our business and the loss of key personnel and the burden of
attracting additional qualified employees may impede the operation and growth of
our business and cause our revenues to decline.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel, but they have no
contractual obligation to remain with us. In particular, our success depends on
the continued service of Gerald Gorman, our Chairman, Thomas Murawski, our Chief
Executive Officer, Brad Schrader, our President, George Abi Zeid, our
President-International Operations, and Debra McClister, our Executive Vice
President and Chief Financial Officer. The loss of the services of Messrs.
Gorman, Murawski, Schrader or Abi Zeid or of Ms. McClister, or several other key
employees, would impede the operation and growth of our business.
To manage our existing business and handle any future growth, we will have
to attract, retain and motivate additional highly skilled employees. In
particular, we will need to hire and retain qualified salespeople if we are to
meet our sales goals. We will also need to hire and retain additional
experienced and skilled technical personnel in order to meet the increasing
technical demands of our expanding business. Competition for employees in
messaging-related businesses is intense. We have in the past experienced, and
expect to continue to experience, difficulty in hiring and retaining employees
with appropriate qualifications. If we are unable to do so, our management may
not be able to effectively manage our business, exploit opportunities and
respond to competitive challenges.
Our business is heavily dependent on technology, including technology that has
not yet been proven reliable at high traffic levels and technology that we do
not control.
The performance of our computer systems is critical to the quality of
service we are able to provide to our customers. If our services are unavailable
or fail to perform to their satisfaction, they may cease using our service. In
addition, our agreements with several of our customers establish minimum
performance standards. If we fail to meet these standards, our customers could
terminate their relationships with us and assert claims for monetary damages.
We may need to upgrade our computer systems to accommodate increases in
messaging traffic and to accommodate increases in the usage of our services, but
we may not be able to do so while maintaining our current level of service, or
at all.
We must continue to expand and adapt our computer systems as the number of
customers and the amount of information they wish to transmit increases and as
their requirements change, and as we further develop our messaging services.
Because we have only been providing some of our services such as managed e-mail
and groupware services for a limited time, and because our computer systems for
these services have not been tested at greater capacities, we cannot guarantee
the ability of our computer systems to connect and manage a substantially larger
number of customers or meet the needs of business customers at high transmission
speeds. If we cannot provide the necessary service while maintaining expected
performance, our business would suffer and our ability to generate revenues
through our services would be impaired.
12
The expansion and adaptation of our computer systems will require
substantial financial, operational and managerial resources. We may not be able
to accurately project the timing of increases in messaging traffic or other
customer requirements. In addition, the very process of upgrading our computer
systems is likely to cause service disruptions. This is because we will have to
take various elements of the network out of service in order to install some
upgrades.
Our computer systems may fail and interrupt our service.
Our customers have in the past experienced interruptions in our services. We
believe that these interruptions will continue to occur from time to time. These
interruptions are due to hardware failures, unsolicited bulk emails that
overload our system, failures in telecommunications and other services provided
to us by third parties and other computer system failures. In particular, we
have experienced outages and delays in email delivery and access to our email
service related to disk failures, the implementation of changes to our computer
system, insufficient storage capacity and other problems. These failures have
resulted and may continue to result in significant disruptions to our service.
Although we plan to install backup computers and implement procedures to reduce
the impact of future malfunctions in these systems, the presence of these and
other single points of failure in our network increases the risk of service
interruptions. Some aspects of our computer systems are not redundant. These
include our database system and our email storage system, which stores emails
and other data. In addition, substantially all of our computer and
communications systems relating to our services other than the systems located
and operated by AT&T Corp. under our Transition Services Agreement with them are
currently located in Manhattan, Jersey City, New Jersey, Edison, New Jersey,
Washington, DC and Dayton, Ohio. We currently do not have alternate sites from
which we could conduct these operations in the event of a disaster. Our computer
and communications hardware is vulnerable to damage or interruption from fire,
flood, earthquake, power loss, telecommunications failure and similar events.
Our services would be suspended for a significant period of time if any of our
primary data centers was severely damaged or destroyed. We might also lose
stored emails and other customer files, causing significant customer
dissatisfaction and possibly giving rise to claims for monetary damages.
Our services will become less desirable or obsolete if we are unable to keep up
with the rapid changes characteristic of our business.
Our success will depend on our ability to enhance our existing services and
to introduce new services in order to adapt to rapidly changing technologies,
industry standards and customer demands. To compete successfully, we will have
to accurately anticipate changes in business and consumer demand and add new
features to our services very rapidly. We also have to regularly upgrade our
software to ensure that it remains compatible with the wide and changing variety
of Web browsers and other software used by our customers. We may not be able to
integrate the necessary technology into our computer systems on a timely basis
or without degrading the performance of our existing services. We cannot be sure
that, once integrated, new technology will function as expected. Delays in
introducing effective new services could cause existing and potential customers
to forego use of our services and to use instead those of our competitors.
13
Our business will suffer if we are unable to provide adequate security for our
service, or if our service is impaired by security measures imposed by third
parties.
Security is a critical issue for any outsourced messaging service, and
presents a number of challenges for us.
If we are unable to maintain the security of our service, our reputation and
our ability to attract and retain customers may suffer, and we may be exposed to
liability. Third parties may attempt to breach our security or that of our
customers whose networks we may maintain or for whom we provide services. If
they are successful, they could obtain information that is sensitive or
confidential to a customer or otherwise disrupt a customer's operations or
obtain confidential information, including our customer's profiles, passwords,
financial account information, credit card numbers, stored email or other
personal or business information. Our customers or their employees may assert
claims for money damages for any breach in our security and any breach could
harm our reputation.
Our computers are vulnerable to computer viruses, physical or electronic
break-ins and similar incursions, which could lead to interruptions, delays or
loss of data. We expect to expend significant capital and other resources to
license or create encryption and other technologies to protect against security
breaches or to alleviate problems caused by any breach. Nevertheless, these
measures may prove ineffective. Our failure to prevent security breaches may
expose us to liability and may adversely affect our ability to attract and
retain customers and develop our business market.
Security measures taken by others may interfere with the efficient operation
of our service, which may harm our reputation, adversely impact our ability to
attract and retain customers. "Firewalls" and similar network security software
employed by many ISPs, employers and schools can interfere with the operation of
our services.
We are dependent on licensed technology.
We license a significant amount of technology from third parties, including
technology related to our managed e-mail and groupware services, virus
protection, spam control and content filtering services, Internet fax services,
billing processes and database. We anticipate that we will need to license
additional technology to remain competitive. We may not be able to license these
technologies on commercially reasonable terms or at all. Third-party licenses
expose us to increased risks, including risks relating to the integration of new
technology, the diversion of resources from the development of our own
proprietary technology, a greater need to generate revenues sufficient to offset
associated license costs, and the possible termination of or failure to renew an
important license by the third-party licensor.
If the Internet and other third-party networks on which we depend to deliver our
services become ineffective as a means of transmitting data, the benefits of our
service may be severely undermined.
Our business depends on the effectiveness of the Internet as a means of
transmitting data. The recent growth in the use of the Internet has caused
frequent interruptions and delays in accessing and transmitting data over the
Internet. Any deterioration in the performance of the Internet as a whole could
undermine the benefits of our services. Therefore, our success depends on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion. We also depend on telecommunications network
suppliers such as AT&T Corp., Worldcom, MFS, BBN Planet and UUNET for a variety
of telecommunications and Internet services. Pending the transition of the
network and operations for the EasyLink Services business acquired from AT&T, we
are dependent on the services being provided to us under our Transition Services
Agreement with AT&T. See "Risk Factors - We May Be Unable to Successfully
Integrate the EasyLink Services Business Acquired From AT&T" above and "Item 1.
Business - Technology" in our Form 10-K for the year ended December 31, 2000
filed on April 2, 2001.
14
Gerald Gorman and George Abi Zeid collectively hold a majority of the total
outstanding voting power of EasyLink and will be able to prevent a change of
control.
Gerald Gorman, our Chairman, held as of November 30, 2001 Class A and Class
B common stock representing approximately 41.5% of the voting power of our
outstanding common stock. Each share of Class B common stock entitles the holder
to 10 votes on any matter submitted to the stockholders. George Abi Zeid, our
President-International Operations and Director, beneficially owned as of
November 30, 2001 Class A common stock representing approximately 8. 9% of the
voting power of our outstanding common stock and, after giving effect to the
issuance of shares issuable upon conversion or exercise of convertible
securities and warrants held by Mr. Abi Zeid, approximately 10.2% of such voting
power. Based on their voting power as of November 30, 2001, Mr. Gorman and Mr.
Abi Zeid will be able to determine the outcome of all matters requiring
stockholder approval, including the election of directors, amendment of our
charter and approval of significant corporate transactions. Mr. Gorman and Mr.
Abi Zeid will be in a position to prevent a change in control of EasyLink even
if the other stockholders were in favor of the transaction.
We have agreed to permit Federal Partners, L.P., a holder of our senior
convertible notes and Class A common stock, to designate one member of our board
of directors. In addition, in connection with the acquisition of Swift
Telecommunications, Inc., we agreed to appoint George Abi Zeid, the former sole
shareholder of Swift, as a director and as our President of International
Operations.
Our charter contains provisions that could deter or make more expensive a
takeover of EasyLink. These provisions include the ability to issue "blank
check" preferred stock without stockholder approval.
Our goal of building brand identity is likely to be difficult and expensive.
We announced on April 2, 2001 that we have changed our corporate name to
EasyLink Services Corporation to more accurately reflect the strengths,
relationships and solutions that we offer. We believe that a quality brand
identity will be essential if we are to develop our business services market. We
do not have experience with some of the types of marketing that we are currently
using. If our marketing efforts cost more than anticipated or if we cannot
increase our brand awareness, our losses will increase and our ability to
succeed will be seriously impeded.
Our expansion into international markets is subject to significant risks and our
losses may increase and our operating results may suffer if our revenues from
international operations do not exceed the costs of those operations.
We intend to continue to expand into international markets and to expend
significant financial and managerial resources to do so. We have limited
experience in international operations and may not be able to compete
effectively in international markets. If our revenues from international
operations do not exceed the expense of establishing and maintaining these
operations, our losses will increase and our operating results will suffer. We
face significant risks inherent in conducting business internationally, such as:
o uncertain demand in foreign markets for messaging services;
o difficulties and costs of staffing and managing international
operations;
15
o differing technology standards;
o difficulties in collecting accounts receivable and longer collection
periods;
o economic instability and fluctuations in currency exchange rates and
imposition of currency exchange controls;
o potentially adverse tax consequences;
o regulatory limitations on the activities in which we can engage and
foreign ownership limitations on our ability to hold an interest in
entities through which we wish to conduct business;
o political instability, unexpected changes in regulatory requirements,
and reduced protection for intellectual property rights in some
countries;
o export restrictions, and
o difficulties in enforcing contracts and potentially adverse
consequences.
Regulation of messaging services and Internet use is evolving and may adversely
impact our business.
There are currently few laws or regulations that specifically regulate
activity on the Internet. However, laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act of 1996 restricts the types of information and content
transmitted over the Internet. Several telecommunications companies have
petitioned the FCC to regulate ISPs and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on these
companies. This could increase the cost of transmitting data over the Internet.
Any new laws or regulations relating to the Internet could adversely affect our
business.
Moreover, the extent to which existing laws relating to issues such as
property ownership, pornography, libel and personal privacy are applicable to
the Internet is uncertain. We could face liability for defamation, copyright,
patent or trademark infringement and other claims based on the content of the
email or fax transmitted over our system. We may also face liability for
unsolicited commercial and other email and fax messages sent by users of our
services. We do not and cannot screen all the content generated and received by
users of our services. Some foreign governments, such as Germany, have enforced
laws and regulations related to content distributed over the Internet that are
more strict than those currently in place in the United States. We may be
subject to legal proceedings and damage claims if we are found to have violated
laws relating to email content.
A majority of our services are currently classified by the FCC as
"information services," and therefore are exempt from public utility regulation.
To the extent that we are permitted to offer all of our services as a single
"bundle of interrelated products," then the whole bundle is currently exempt
from regulation as a "hybrid service." If considered independent of the bundle,
however, our fax-to-fax services, when conducted over circuit-switched network
lines, and our telex services, qualify as "telecommunications services," and
would thus be subject to federal regulation. Moreover, while the FCC has until
now exercised forbearance in regulating IP communications, it has indicated that
it might regulate certain IP communications as "telecommunications services" in
the future. There can be no assurance that the FCC will not change its
regulatory classification system and thereby subject us to unexpected and
burdensome additional regulation. In addition, a variety of states regulate
certain of our services when provided on an intrastate basis.
16
We obtained authorizations from the FCC to provide such telecommunications
services in conjunction with our acquisition of these telecommunications
services from NetMoves, and are classified as a "non-dominant interexchange
carrier." While the FCC has generally chosen not to exercise its statutory power
to closely regulate the charges or practices of non-dominant carriers, it will
act upon complaints against such carriers for failure to comply with statutory
obligations or with the FCC's rules, regulations and policies - to the extent
that such services are, in the FCC's view, subject to regulation.
Continued changes in telecommunications regulations may significantly reduce
the cost of domestic and international calls. To the extent that the cost of
domestic and international calls decreases, we will face increased competition
for our fax services which may have a material adverse effect on our business,
financial condition or results in operations.
In connection with the deployment of Internet-capable nodes in countries
throughout the world, we are required to satisfy a variety of foreign regulatory
requirements. We intend to explore and seek to comply with these requirements on
a country-by-country basis as the deployment of Internet-capable fax nodes
continues. There can be no assurance that we will be able to satisfy the
regulatory requirements in each of the countries currently targeted for node
deployment, and the failure to satisfy such requirements may prevent us from
installing Internet-capable fax nodes in such countries. The failure to deploy a
number of such nodes could have a material adverse effect on our business,
operating results and financial condition.
Our fax nodes and our faxLauncher service utilize encryption technology in
connection with the routing of customer documents through the Internet. The
export of such encryption technology is regulated by the United States
government. We have authority for the export of such encryption technology other
than to Cuba, Iran, Iraq, Libya, North Korea, and Rwanda. Nevertheless, there
can be no assurance that such authority will not be revoked or modified at any
time for any particular jurisdiction or in general. In addition, there can be no
assurance that such export controls, either in their current form or as may be
subsequently enacted, will not limit our ability to distribute our services
outside of the United States or electronically. While we take precautions
against unlawful exportation of our software, the global nature of the Internet
makes it virtually impossible to effectively control the distribution of our
services. Moreover, future Federal or state legislation or regulation may
further limit levels of encryption or authentication technology. Any such export
restrictions, the unlawful exportation of our services, or new legislation or
regulation could have a material adverse effect on our business, financial
condition and results of operations.
The legal structure and scope of operations of our subsidiaries in some
foreign countries may be subject to restrictions which could result in severe
limits to our ability to conduct business in these countries and this could have
a material adverse effect on our financial position, results of operations and
cash flows. To the extent that we develop or offer messaging services in foreign
countries, we will be subject to the laws and regulations of these countries.
The laws and regulations relating to the Internet in many countries are evolving
and in many cases are unclear as to their application. For example, in India,
the PRC and other countries we may be subject to licensing requirements with
respect to the activities in which we propose to engage and we may also be
subject to foreign ownership limitations or other approval requirements that
preclude our ownership interests or limit our ownership interests to up to 49%
of the entities through which we propose to conduct any regulated activities. If
these limitations apply to our activities, including our activities conducted
through our subsidiaries, our opportunities to generate revenue will be reduced,
our ability to compete successfully in these markets will be adversely affected,
our ability to raise capital in the private and public markets may be adversely
affected and the value of our investments and acquisitions in these markets may
decline. Moreover, to the extent we are limited in our ability to engage in
certain activities or are required to contract for these services from a
licensed or authorized third party, our costs of providing our services will
increase and our ability to generate profits may be adversely affected.
17
Our intellectual property rights are critical to our success, but may be
difficult to protect.
We regard our copyrights, service marks, trademarks, trade secrets, domain
names and similar intellectual property as critical to our success. We rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers, strategic partners and others
to protect our proprietary rights. Despite our precautions, unauthorized third
parties may improperly obtain and use information that we regard as proprietary.
Third parties may submit false registration data attempting to transfer key
domain names to their control. Our failure to pay annual registration fees for
key domain names may result in the loss of these domains to third parties. Third
parties have challenged our rights to use some of our domain names, and we
expect that they will continue to do so, which may affect the value that we can
derive from the planned disposition of the domain names included among our
non-core assets.
The status of United States patent protection for software products is not
well defined and will evolve as additional patents are granted. If we apply for
a patent in the future, we do not know if our application will be issued with
the scope of the claims we seek, if at all. The laws of some foreign countries
do not protect proprietary rights to the same extent as do the laws of the
United States. Our means of protecting our proprietary rights in the United
States or abroad may not be adequate and competitors may independently develop
similar technology.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties have asserted and may in
the future assert infringement claims against us. We cannot be certain that our
services do not infringe issued patents. Because patent applications in the
United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to our services.
We have been and may continue to be subject to legal proceedings and claims
from time to time in the ordinary course of our business, including claims
related to the use of our domain names and claims of alleged infringement of the
trademarks and other intellectual property rights of third parties. Third
parties have challenged our rights to register and use some of our domain names
based on trademark principles and on the recently enacted Anticybersquatting
Consumer Protection Act. If domain names become more valuable to businesses and
other persons, we expect that third parties will continue to challenge some of
our domain names and that the number of these challenges may increase. In
addition, the existing or future laws of some countries, in particular countries
in Europe, may limit or prohibit the use in those countries or elsewhere of some
of our geographic names that contain the names of a city in those countries or
the name of those countries. Intellectual property litigation is expensive and
time-consuming and could divert management's attention away from running our
business. These claims and the potential for such claims may reduce the value
that we can expect to receive from the disposition of our domain names.
A substantial amount of our common stock may come onto the market in the future,
which could depress our stock price.
Sales of a substantial number of shares of our common stock in the public
market could cause the market price of our Class A common stock to decline. As
of November 30, 2001, we had an aggregate of 155,056,594 shares of Class A and
Class B common stock outstanding. In addition, we were obligated to issue an
additional 1,000,000 shares of our Class A common stock subject to certain
conditions if the closing price of our Class A common stock has not traded at or
above $10 per share for five consecutive days on or before December 31, 2001. As
of November 30, 2001 we had options to purchase approximately 18.4 million
shares of Class A common stock outstanding. As of November 30, 2001, we had
warrants to purchase 18,439,449 shares of Class A common stock outstanding. As
of November 30, 2001, we had approximately 43,979,142 shares of Class A common
stock issuable upon conversion of outstanding senior convertible notes and an
indeterminate number of additional shares of Class A common stock issuable over
five years in payment of interest on such senior notes. In addition, we had
1,271,504 shares of Class A common stock issuable upon conversion of our
remaining outstanding 7% Convertible Subordinated Notes due 2005 at an exercise
price of $18.95 per share.
18
As of November 30, 2001, approximately 75,905,643 shares of Class A common
stock and Class B common stock were freely tradable, in some cases subject to
the volume and manner of sale limitations contained in Rule 144. As of such
date, approximately 79,150,951 shares of Class A common stock will become
available for sale at various later dates upon the expiration of one-year
holding periods or upon the expiration of any other applicable restrictions on
resale. We are likely to issue large amounts of additional Class A common stock,
which may also be sold and which could adversely affect the price of our stock.
As of November 30, 2001, the holders of approximately 92,525,984 shares of
outstanding Class A common stock, the holders of 17,962,578 shares of Class A
common stock issuable upon exercise of our outstanding warrants and the holders
of approximately 78,343,152 shares of Class A common stock issuable upon
conversion of our outstanding senior or subordinated convertible notes and
issuable in payment of interest over the first 18 months after the date of
issuance on our senior convertible notes, had the right, subject to various
conditions, to require us to file registration statements covering their shares,
or to include their shares in registration statements that we may file for
ourselves or for other stockholders. By exercising their registration rights and
selling a large number of shares, these holders could cause the price of the
Class A common stock to fall. An undetermined number of these shares have been
sold publicly pursuant to Rule 144.
Our Class A common stock may be subject to delisting from the Nasdaq National
Market.
Our Class A common stock faces potential delisting from the Nasdaq National
Market which could hurt the liquidity of our Class A common stock. We may be
unable to comply with the standards for continued listing on the Nasdaq National
Market. These standards require, among other things, that our Class A common
stock have a minimum bid price of $1 and state that a deficiency shall exist if
such minimum bid price remains below $1 for a period of thirty consecutive
business days. The minimum bid price of our stock has been below $1 during
various periods during the fourth quarter of 2000 and the first quarter of 2001
and has been below $1 during the period from March 14, 2001 through December 31,
2001.
On July 27, 2001, the Company received a Nasdaq Staff Determination
indicating that it had failed to regain compliance with the $1.00 minimum bid
price requirement for continued listing. Nasdaq has since notified the Company
that EasyLink now complies with all requirements for continued listing on The
Nasdaq National Market due to the Nasdaq moratorium on the minimum bid price
requirement. Under the moratorium, the minimum bid price requirement will be
suspended until January 2, 2002, at which time the 30- and 90-day periods
provided by Nasdaq marketplace Rule 4310(c)(8)(B) will start anew. Specifically,
an issuer will be considered non-compliant with the minimum bid price
requirement only if it fails to satisfy the applicable requirement for 30
consecutive trading days following January 1, 2002. It would then be afforded a
90 calendar day grace period in which to regain compliance.
19
If our common stock were to be delisted from trading on the Nasdaq National
Market and were neither re-listed thereon nor listed for trading on the Nasdaq
Small Cap Market or other recognized securities exchange, trading, if any, in
the Class A common stock may continue to be conducted on the OTC Bulletin Board
or in the non-Nasdaq over-the-counter market. Delisting would result in limited
release of the market price of the Class A common stock and limited news
coverage of EasyLink and could restrict investors' interest in our Class A
common stock and materially adversely affect the trading market and prices for
our Class A common stock and our ability to issue additional securities or to
secure additional financing.
Our stock price has been volatile and we expect that it will continue to be
volatile.
Our stock price has been volatile since our initial public offering and we
expect that it will continue to be volatile. As discussed above, our financial
results are difficult to predict and could fluctuate significantly. In addition,
the market prices of securities of Internet-related companies have been highly
volatile. A stock's price is often influenced by rapidly changing perceptions
about the future of the Internet or the results of other Internet or technology
companies, rather than specific developments relating to the issuer of that
particular stock. As a result of volatility in our stock price, a securities
class action may be brought against us. Class-action litigation could result in
substantial costs and divert our management's attention and resources.
We have continuing obligations in connection with the sale of our advertising
network business.
On March 30, 2001, we completed the sale of our advertising network business
to Net2Phone, Inc. Included in the sale were our rights to provide e-mail-based
advertising and permission marketing solutions to advertisers, as well as our
rights to provide e-mail services directly to consumers at the www.mail.com Web
site and in partnership with other Web sites. In connection with the sale, we
entered into a hosting agreement under which we will host or arrange to host the
consumer e-mailboxes for Net2Phone for a minimum of one year. During the second
quarter of 2001, we completed the migration of the hosting of these consumer
mailboxes to a third party provider whom we pay for this service. On November
14, 2001, we entered into an agreement with Net2Phone which terminated the
hosting agreement as of September 30, 2001.
Notwithstanding the migration of the consumer mailboxes to the third party
provider or the assignment of Web site contracts with third parties to
Net2Phone, we may nonetheless remain liable for our obligations under such third
party Web site contracts. Accordingly, we may have liability if there is a
breach on the part of the third party to which we have migrated the hosting or
on the part of Net2Phone under the third party Web site agreements that are
assigned to them.
20
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of
our Class A common stock under this prospectus. We will not receive any proceeds
from these sales.
DESCRIPTION OF CAPITAL STOCK
The following descriptions of our capital stock and the relevant provisions
of our amended and restated certificate of incorporation, as amended, and bylaws
are summaries and are qualified by reference to our amended and restated
certificate of incorporation, as amended, and our bylaws.
We are authorized to issue up to 500,000,000 shares of Class A common
stock, par value $.01 per share, 10,000,000 shares of Class B common stock, par
value $.01 per share, and 60,000,000 shares of preferred stock, par value $.01
per share.
Common stock
As of November 30, 2001, we had approximately 145,056,594 shares of Class A
common stock outstanding held of record by approximately 617 stockholders and
10,000,000 shares of Class B common stock outstanding held entirely by Gerald
Gorman, our Chairman. At a special meeting of stockholders held on August 29,
2001, our stockholders approved nine separate amendments to our Amended and
Restated Certificate of Incorporation, as amended, to enable us to effect one or
more reverse stock splits, ranging from a one-for-two reverse stock split to a
one-for-ten reverse stock split of all of our issued and outstanding shares of
Class A and Class B common stock. Our Board of Directors may elect to implement
or abandon one or more of the reverse stock splits.
All of the issued and outstanding shares of our Class A common stock are
fully paid and nonassessable. Except as described below, the issued and
outstanding shares of our Class A common stock and Class B common stock
generally have identical rights. In addition, under our amended and restated
certificate of incorporation, as amended, holders of Class A common stock have
no preemptive or other subscription rights to purchase shares of our stock, nor
are they entitled to the benefits of any redemption or sinking fund provisions.
Voting rights
The holders of our Class A common stock are entitled to one vote per share
on all matters to be voted on by stockholders generally, including the election
of directors. The holder of our Class B common stock is entitled to ten votes
per share on all matters to be voted on by stockholders generally, including the
election of directors. In addition to any class vote that may be required under
law or our amended and restated certificate of incorporation, as amended, all
classes of capital stock entitled to vote generally on any matter vote together
as a single class. There are no cumulative voting rights. Accordingly, holders
of a majority of the total votes entitled to vote in an election of directors
will be able to elect all of the directors standing for election.
Please see "Risk Factors - Gerald Gorman and George Abi Zeid collectively
hold a majority of the total outstanding voting power of EasyLink and will be
able to prevent a change of control."
Liquidation preferences
If we are liquidated, dissolved or wound up, the holders of our Class A
common stock and Class B common stock will be entitled to receive distributions
only after satisfaction of all liabilities and the prior rights of any
outstanding class of preferred stock. If we are liquidated, dissolved or wound
up, our assets legally available after satisfaction of all of our liabilities
shall be distributed to the holders of our Class A common stock and Class B
common stock pro rata based on the respective numbers of shares of Class A
common stock held by these holders or issuable to them upon conversion of Class
B common stock.
21
Conversion rights/mandatory conversion
Holders of our Class A common stock have no conversion rights. Holders of
our Class B common stock may convert each share into one share of Class A common
stock. In addition, the holder of Class B common stock has contractually agreed
with the former holders of Class C preferred stock and Class E preferred stock
and some former holders of Class A preferred stock that he will not transfer his
shares of Class B common stock in the form of Class B common stock unless such
holders have had the opportunity within specified time periods to dispose of
their shares of Class A common stock issuable upon conversion of their preferred
stock at specified prices. As a result, until this condition has been satisfied
or the former holders of a majority in interest of each class of preferred stock
otherwise consent in writing, the holder of Class B common stock must convert
shares of Class B common stock into shares of Class A common stock prior to
transfer.
Dividends
The holders of both classes of our common stock are entitled to receive
equal non-cumulative dividends when and as declared from time to time by the
board of directors, subject to any preferential dividend rights of any
outstanding preferred stock.
Preferred stock
Under our amended and restated certificate of incorporation, as amended,
the board of directors is authorized, without further stockholder approval, to
issue up to 60,000,000 shares of preferred stock in one or more classes or
series. The board also has the authority to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such class or series, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences.
Preferred stock could thus be issued quickly with terms that could delay or
prevent a change of control of EasyLink or make removal of management more
difficult. Additionally, the issuance of preferred stock may decrease the market
price of our Class A common stock and may adversely affect the voting and other
rights of the holders of our Class A common stock. Currently, we do not have any
preferred stock outstanding and have no plans to create or issue any shares of
any new class or series of preferred stock.
Anti-takeover effects of certain provisions of Delaware law and our amended and
restated certificate of incorporation, as amended, and bylaws
We are subject to the provisions of Section 203 of the General Corporation
Law of the State of Delaware. Generally, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the time of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of a corporation's
voting stock. This statute could prohibit or delay the accomplishment of mergers
or other takeovers or changes in control with respect to EasyLink and,
accordingly, may discourage attempts to acquire EasyLink.
22
In addition, provisions of the amended and restated certificate, as
amended, and bylaws, which provisions are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect. These provisions may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interests, including those attempts that might
result in a premium over the market price for the shares held by stockholders.
Board of Directors vacancies. Our bylaws authorize the board of directors
to fill vacant directorships or increase the size of the board of directors.
This may prevent a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies created by such removal with its own nominees.
Special meetings of stockholders. Our bylaws provide that special meetings
of stockholders of EasyLink may be called at any time by the Chairman of the
board, the Vice Chairman of the board, if any, the President, if any, or the
board of directors. Written notice of the meeting must be given not less than 10
nor more than 60 days before the date of the meeting.
Authorized but unissued shares. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval, subject to the limitations imposed by The Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of EasyLink by means of a
proxy contest, tender offer, merger or otherwise.
The General Corporation Law of the State of Delaware provides generally
that, in addition to the approval of the board of directors, the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation unless a corporation's
certificate of incorporation requires a greater percentage.
Transfer agent and registrar
The transfer agent and registrar for our Class A common stock is American
Stock Transfer and Trust Company.
23
SELLING STOCKHOLDERS
The table below sets forth information with respect to the beneficial
ownership of our Class A common stock by the selling stockholders immediately
prior to this offering and as adjusted to reflect the sale of shares of our
Class A common stock in the offering. All information with respect to the
beneficial ownership has been furnished by the respective selling stockholders.
Percentages are based on the 155,056,594 shares of Class A common stock and
Class B common stock outstanding on November 30, 2001.
Holders of Senior Convertible Notes
Number of Number of Number of Percentage of
Shares Shares Offered Shares to be Shares to be
Beneficially by this Held After Held After
Selling Stockholder Owned(1) Prospectus(1)(2) Offering Offering(3)
------------------- -------- ---------------- -------- -----------
Federal Partners, L.P.(4) 14,466,319(5) 14,466,319 0 *
Public Employee Retirement System of Idaho 3,919,541 3,919,541 0 *
City of Milford Pension & Retirement Fund 1,125,957 1,125,957 0 *
Morgan Trust Co. of the Bahamas Ltd. as Trustee 741,434 741,434 0 *
U/A/D 11/30/93
Wells Family LLC 743,132 743,132 0 *
Albert L. Zesiger 660,456 660,456 0 *
Roanoke College 561,875 561,875 0 *
Domenic J. Mizio 561,875 561,875 0 *
NFIB Corporate Account 455,403 455,403 0 *
City of Stamford Firemen's Pension Fund 462,194 462,194 0 *
Barrie Ramsay Zesiger 462,194 462,194 0 *
Wolfson Investment Partners LP 382,316 382,316 0 *
Dean Witter Foundation 382,316 382,316 0 *
National Federation of Independent Business 233,514 233,514 0 *
Employee Pension Trust
The Jenifer Altman Foundation 332,475 332,475 0 *
Theeuwes Family Trust, Felix Theeuwes Trustee 280,938 280,938 0 *
Susan Uris Halpern 280,938 280,938 0 *
Andrew Heiskell 282,635 282,635 0 *
Meehan Foundation 164,256 164,256 0 *
The Meehan Investment Partnership I, L.P. 179,559 179,559 0 *
Murray Capital, LLC 179,559 179,559 0 *
Mary C. Anderson 115,059 115,059 0 *
Butler Family LLC 185,557 185,557 0 *
William B. Lazar 151,219 151,219 0 *
Psychology Associates 129,719 129,719 0 *
Peter Looram 138,319 138,319 0 *
Nicola Zesiger Mullen 138,319 138,319 0 *
Lazar Foundation 142,619 142,619 0 *
Jeanne L. Morency 151,219 151,219 0 *
Helen Hunt 151,219 151,219 0 *
HBL Charitable Unitrust 129,719 129,719 0 *
David Zesiger 138,319 138,319 0 *
Asphalt Green, Inc. 129,719 129,719 0 *
Alexa Zesiger Carver 138,319 138,319 0 *
A. Carey Zesiger 138,319 138,319 0 *
Leonard Kingsley 99,681 99,681 0 *
Donald and Dan-Thanh Devivo 29,189 29,189 0 *
John J. & Catherine H. Kayola 28,094 28,094 0 *
Mary I. Estabil 17,787 17,787 0 *
24
James F. Cleary 19,937 19,937 0 *
Frederick Landman 1,834,861(6) 1,834,861 0 *
The Waterproof Partnership, L.P. 307,535 307,535 0 *
Sapient Corporation 57,625 57,625 0 *
Tumbleweed Communications Corp. 537,500 537,500 0 *
Francois deMenil 215,000 215,000 0 *
Peoples Benefit Life Insurance Co. (Teamsters 238,778 238,778 0 *
Separate Account)
Peoples Benefit Life Insurance Company 265,310 265,310 0 *
Retail Clerks Pension Trust #2 795,928 795,928 0 *
St. Albans Partners Ltd. 795,928 795,928 0 *
Yield Strategies Fund I, L.P. 530,619 530,619 0 *
Bank Of America Pension Plan 848,989 848,989 0 *
Circlet (IMA) Limited 791,948 791,948 0 *
General Motors Welfare Benefit Trust (ST-VEBA) 167,145 167,145 0 *
Newberg Family Trust 132,655 132,655 0 *
Woodmont Investments Limited 132,655 132,655 0 *
JMG Capital Partners, L.P. 2,124,597 2,124,597 0 *
JMG Triton Offshore Fund Limited 3,517,206 3,517,206 0 *
Deutsche Banc Alex. Brown Inc. 202,625 202,625 0 *
Deutsche Bank AG, London Branch 658,534 658,534 0 *
The Common Fund F/A/O Absolute Return Fund 78,011 78,011 0 *
Helix Convertible Opportunities Fund, Ltd. 275,572 275,572 0 *
Helix Convertible Opportunities, L.P. 355,609 355,609 0 *
BNP Cooper Neff Convertible Strategies Fund, L.P. 62,003 62,003 0 *
BNP Paribas Equity Strategies, S.N.C. 930,863 930,863 0 *
J. N. Industries Inc. 83,827(7) 86,604 2,777 *
Merced Partners Limited Partnership 506,564 506,564 0 *
Fir Tree Institutional Value Fund, L.P. 1,654,613 1,654,613 0 *
Fir Tree Recovery Master Fund, L.P. 304,170 304,170 0 *
Fir Tree Value Fund, L.P. 4,183,299 4,183,299 0 *
Fir Tree Value Partners, LDC. 359,568 359,568 0 *
Other Holders
Number of Number of Number of Percentage of
Shares Shares Offered Shares to be Shares to be
Beneficially by this Held After Held After
Selling Stockholder Owned Prospectus(2) Offering Offering
------------------- ----- ------------- -------- --------
Bantu, Inc.(8) 445,744 445,744 0 *
3Cube, Inc.(9) 144,632 64,549 80,083 *
STD, Inc.(10) 185,686 185,686 0 *
Edd Helms Group, Inc.(11) 13,750 13,750 0 *
Madison Avenue Technology Group, Inc.(12) 102,215 102,215 0 *
SG Cowen Securities Corporation(13) 317,460 317,460 0 *
Aligned Investments Limited(14) 781,639 211,041 570,598 *
K. Digvijay Sing(15) 75,900(16) 75,900 0 *
Arvindra Kanwal(17) 30,000(16) 30,000 0 *
Sandeep Dalal(18) 38,125(16) 38,125 0 *
James Ting(19) 1,372,465(16) 1,134,583 237,882 *
Robert Tsang(19) 618,200(16) 486,250 131,950 *
Prasad Investment(20) 261,333(21) 261,333 0 *
Allan Kwan(22) 582,633 47,856 534,777 *
Po Ling Shiu(23) 14,040 8,827 5,213 *
Wai Ming Chu(23) 10,038 10,038 0 *
25
Tyson Li(23) 30,970 30,970 0 *
Sing Keung Lam(23) 56,421 42,743 13,678 *
Yin Nei Kwok(23) 3,049 3,049 0 *
Ming Fat Lam(23) 4,404 4,404 0 *
Alexandra Rehak(23) 16,489 16,489 0 *
Dee Han "Lanna" Ng(23) 7,498 7,498 0 *
Chi Feng Sze(23) 10,585 10,585 0 *
Albert Lam(23) 63,689 63,689 0 *
David Yen(24) 430,074 19,868 410,206 *
Brent Lee(23) 15,388 15,388 0 *
Li Wang(23) 9,930 9,930 0 *
Frank Meng(23) 38,389 38,389 0 *
Hua "Cao(23) 16,241 16,241 0 *
Michael Hiu(23) 1,048 1,048 0 *
Donald Ee(23) 24,511 24,511 0 *
Kee Hong Lu(23) 969 969 0 *
Lawrence Chai(23) 45,811 32,133 13,678 *
Shu-Hui Liu(23) 4,954 4,954 0 *
Tiffany Chang(23) 7,527 7,527 0 *
Chun-Yuan Yeh(23) 11,259 2,925 8,334 *
Po-Yu Liu(23) 6,799 1,935 4,864 *
Tsung Hsi Lee(23) 3,502 1,759 1,743 *
Yi-Nan Tsai(23) 3,906 3,383 523 *
Yu-Chun Hsiao(23) 1,772 1,772 0 *
Chia-Yung Chou(23) 2,475 1,952 523 *
Yueh Fong Hsieh(23) 2,335 1,482 853 *
Kuo-Hsiang Chang(23) 1,980 1,980 0 *
Pao Lung Chang(23) 26 26 0 *
Pei-Chen Teresa Lin(23) 1,614 1,614 0 *
Yi-Hsuan Lin(23) 1,745 1,745 0 *
Ya-Ling Yeh(23) 3,251 3,251 0 *
Yu-Chien Jeng(23) 1,152 1,152 0 *
Ching-Yi Chen(23) 1,887 1,887 0 *
Yi-Yi Tsung(23) 1,489 1,489 0 *
Hsin-Ying Chen(23) 1,113 1,113 0 *
I-Hung Lin(23) 2,432 2,432 0 *
Ren-Rung Iau(23) 123 123 0 *
Chih-Hao Chen(23) 369 369 0 *
Pei Chun Lin(23) 1,277 1,277 0 *
Wu-Chuan Chen(23) 4,303 4,303 0 *
Hsiu Ru Ko(23) 1,639 1,639 0 *
Chen-Ching Wang(23) 3,850 3,850 0 *
Yuan Shun Sun(23) 3,110 3,110 0 *
Li-Fang Lin(23) 1,423 1,423 0 *
Tsan Hsien Yang(23) 1,605 1,605 0 *
Yu-Shyan Chiu(23) 1,113 1,113 0 *
Vigers Design Limited(25) 5,191 5,191 0 *
Ching Yuen So(25) 5,114 5,114 0 *
Chia-Chin Charles Chu(25) 4,894 4,894 0 *
Seconom Limited(25) 1,110 1,110 0 *
Chi-Hung Lin(25) 3,040 3,040 0 *
Vignette Asia Pte Ltd.(26) 16,888 16,888 0 *
GameSpy Industries, Inc.(27) 604,230 604,230 0 *
AT&T Corp. 27,839,798(28) 27,839,798 0 *
George Abi Zeid(29) 26,690,935(30) 7,914,759 18,776,176 13.35%
CitiCapital Commercial Leasing Corporation 1,633,323(31) 1,633,323 0 *
26
Fleet Business Credit, LLC 2,228,224(32) 2,228,224 0 *
Forsythe/McArthur Associates, Inc. 4,262,180(33) 4,262,180 0 *
GATX Financial Corporation 9,820,000(34) 9,820,000 0 *
Leasing Technologies International, Inc. 669,766(35) 669,766 0 *
MicroTech Leasing Corporation 1,098,359(36) 1,098,359 0 *
Pentech Financial Services, Inc. 1,743,744(37) 1,743,744 0 *
Phoenix Leasing Incorporated 1,994,805(38) 1,994,805 0 *
TBCC Funding Trust II, a Delaware business Trust 1,767,480(39) 1,767,480 0 *
AsiaStar IT Fund, L.P.(40) 3,955,000 3,955,000 0 *
Primus Capital Fund V Limited Partnership(40) 2,926,500 2,926,500 0 *
Primus Executive Fund V Limited Partnership(40) 73,500 73,500 0 *
The Kaufmann Fund, Inc(40) 3,000,000 3,000,000 0 *
Lawrence Auriana(40) 1,000,000 1,000,000 0 *
Susan Lerner and Peter Lerner, JTROS(40) 104,000 104,000 0 *
EMC Investment Corporation(40) 3,000,000 3,000,000 0 *
Joseph Zappala(40) 50,000 50,000 0 *
Bartholomew Lawson(40) 50,000 50,000 0 *
John W. Taylor(40) 20,000 20,000 0 *
Kilin To(40) 10,000 10,000 0 *
Michael Horgan(40) 5,000 5,000 0 *
Elaine Graham, Agent, Keith Grahm, 187,500 187,500 0 *
Beneficiary FCC Custodian(41)
Peter Chih-Yuan Horng(41) 125,000 125,000 0 *
Vincenzo Iannucci(41) 250,000 250,000 0 *
Lillian S. Loewenbaum(41) 750,000 750,000 0 *
Bob Miller(41) 250,000 250,000 0 *
Gary Millin(41)(42) 1,348,386 150,000 1,198,386 1.76%
Stephen J. Morris(41) 125,000 125,000 0 *
Eugene Sukonick(41) 500,000 500,000 0 *
St. Denis J. Villere(41) 525,000 525,000 0 *
Christopher D. Villere(41) 62,500 62,500 0 *
Lamar G. Villere(41) 62,500 62,500 0 *
George G. Villere(41) 187,500 187,500 0 *
Frances G. Villere(41) 187,500 187,500 0 *
St. Denis J. Villere III(41) 100,000 100,000 0 *
St. Denis J. Villere & Margaret H. Villere, 125,000 125,000 0 *
Usufruct(41)
Michael R. Nicolais(41) 250,000 250,000 0 *
Michael A. Nicolais IRA Rollover(41) 800,000 625,000 175,000 *
Howard Hammond(41) 1,250,000 1,250,000 0 *
Daniel O'Sullivan(41) 80,000 75,000 5,000 *
Envios R.D. Corp.(41) 1,750,000 1,750,000 0 *
Joseph Wofchuck(41) 500,000 500,000 0 *
McFenix Partners, Ltd.(41) 125,000 125,000 0 *
Olivhan Investments, L.P.(41) 1,500,000 1,500,000 0 *
John R. Whitman (41) 100,425 62,500 37,925 *
Seth L. Pierrepont (41) 37,500 37,500 0 *
Eric Lin (41) 37,500 37,500 0 *
Richard M. Chong(40)(41) 22,500 22,500 0 *
Telecom International, Inc.(43) 3,000,000 3,000,000 0 *
RCG Information Technology, Inc.(44) 625,000 625,000 0 *
Abdullah (Alan) Abdullahi(45) 313,503 313,503 0 *
Hassan Abdullahi(45) 313,503 313,503 0 *
27
Bruce Coleman 75,000 75,000 0 *
Kenneth Goodwin 75,000 75,000 0 *
Stephen Finnerty(46) 320,000 320,000 0 *
Elong, Inc. (47) 362,319 362,319 0 *
MyIndia.com, Inc.(48) 560,748 560,748 0 *
--------
* Less than one percent
(1) Except as otherwise disclosed in other footnotes below, the number of
shares beneficially owned by the holders of senior convertible notes
represents shares issuable upon conversion of our Senior Convertible Notes
or mandatorily issuable in payment of a portion of the interest on our
Senior Convertible Notes. The conversion price is subject to adjustment
and, as a result, the number of shares may increase.
(2) This prospectus also covers any additional shares of Class A common stock
that become issuable as a result of a stock split, stock dividend or
similar transaction that results in an increase in the number of our
outstanding shares of common stock.
(3) In accordance with the rules of the SEC, the percentage of Class A common
stock outstanding owned by each selling stockholder is calculated as
follows: (a) the numerator is the number of shares of Class A common stock
held by that selling stockholder upon conversion of all Senior Convertible
Notes owned by that selling stockholder and (b) the denominator includes
the number of shares of Class A common stock and Class B common stock
outstanding and the number of shares of Class A common stock held by that
selling securityholder upon conversion of all notes owned by that selling
securityholder.
(4) Stephen Duff, a director of EasyLink, is Treasurer and a limited partner of
Federal Partners, L.P. Mr. Duff is also the Senior Investment Manager of
The Clark Estates, Inc. The Clark Estates, Inc. provides management and
administrative services to Federal Partners.
(5) Includes 8,250,000 shares of our Class A common stock. Excludes 1,943,800
shares of Class A common stock not being sold pursuant to this prospectus
that are held by accounts for which The Clark Estates, Inc. provides
management and administrative services.
(6) Includes 625,000 shares of our Class A common stock held by Frederick
Landman.
(7) Includes 2,777 shares of our Class A common stock held by J.N. Industries.
(8) Concurrently with our investment in Bantu, we purchased source code and
entered into a related development agreement
(9) We have received a technology license from 3Cube, Inc. that allows us to
offer Web-based and email to fax services across our network of Web sites
and ISP partners and our business customers.
(10) Doing business as Software Tool and Die. Barry Shein, President of STD, is
an advisor to our board of directors and we have entered into an
indemnification agreement with him to indemnify him from liabilities
arising out of his capacity as an advisor.
(11) In 2000, we purchased phone number from Edd Helms Group, Inc.
(12) In July 2000, we entered into a preferred list hosting agreement with
Madison Avenue Technology Group that appointed us as a preferred reseller
of CheetahMail's list host management services.
(13) SG Cowen Securities Corporation acted as an underwriter in connection with
our initial public offering in June 1999, as an initial purchaser in
connection with the issuance of our 7% convertible subordinated debentures
in January 2000 and as our financial advisor in connection with the sale of
our advertising network business completed in March 2001.
(14) Aligned Investments was a principal stockholder of Huelink Corporation
Limited, which was acquired by our majority-owned subsidiary Asia.com, Inc.
on June 1, 2000. Allen Huie, the principal stockholder of Aligned
Investments became a director of Asia.com, Inc. upon the acquisition of
Huelink Corporation Limited.
(15) Former director and chief executive officer of India.com, Inc., a
majority-owned subsidiary of EasyLink.
(16) Excludes shares issuable upon the exercise of employee stock options.
(17) Former President - Content of India.com, Inc., a majority-owned subsidiary
of EasyLink.
(18) Former President - U.S. Operations and Alliances and Acquisitions of
India.com, Inc., a majority-owned subsidiary of EasyLink.
(19) Former shareholder of TCom, Inc. EasyLink acquired TCom on October 18, 1999
in a merger. Since the merger, this selling stockholder has been employed
by EasyLink in various capacities.
(20) Prasad Investment sold MyIndia.com Inc. to our majority-owned subsidiary
India.com, Inc. in February 2001.
(21) Includes 65,333 potentially issuable as contingent payments in connection
with the acquisition described in footnote 19 above.
(22) Chief executive officer and director of our majority-owned subsidiary
Asia.com, Inc. Mr. Kwan was an indirect principal stockholder of Huelink
Corporation Limited, which was acquired by our majority-owned subsidiary
Asia.com, Inc. on June 1, 2000.
(23) Former employee of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink.
(24) Former employee of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink. Mr. Yen was an indirect principal stockholder of
Huelink Corporation Limited, which was acquired by our majority-owned
subsidiary Asia.com, Inc. on June 1, 2000.
(25) Former vendor of a subsidiary of Asia.com, Inc., a majority-owned
subsidiary of EasyLink.
(26) Former vendor of India.com, Inc. a majority-owned subsidiary of EasyLink.
(27) Former vendor of EasyLink.
28
(28) Includes 10,000,000 shares issuable upon exercise of warrants and up to
3,600,000 shares issuable in payment of interest under a promissory note
issued upon consummation of the Company's debt restructuring completed on
November 27, 2001.
(29) Mr. Abi Zeid is President - International Operations and a director of
EasyLink.
(30) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 2,682,965 shares issuable upon exercise of
warrants, 2,682,695 shares issuable upon conversion of a convertible
promissory note and up to 965,867 shares issuable in payment of interest
under the convertible promissory note. Excludes 3,000,000 shares held by
Telecom International, Inc. which are also covered under this prospectus.
See Telecom International, Inc. and footnote no. 43 of this Selling
Stockholders table.
(31) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 486,108 shares issuable upon exercise of
warrants, 486,108 shares issuable upon conversion of a convertible
promissory note and up to 174,999 shares issuable in payment of interest
under the convertible promissory note.
(32) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 663,162 shares issuable upon exercise of
warrants, 663,162 shares issuable upon conversion of a convertible
promissory note and up to 238,738 shares issuable in payment of interest
under the convertible promissory note.
(33) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 643,506 shares issuable upon exercise of
warrants, 643,506 shares issuable upon conversion of a convertible
promissory note and up to 231,662 shares issuable in payment of interest
under the convertible promissory note.
(34) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 2,625,000 shares issuable upon exercise of
warrants, 2,625,000 shares issuable upon conversion of a convertible
promissory note and up to 945,000 shares issuable in payment of interest
under the convertible promissory note.
(35) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 351,276 shares issuable upon conversion of a
convertible promissory note and up to 84,306 shares issuable in payment of
interest under the convertible promissory note.
(36) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 454,849 shares issuable upon conversion of a
convertible promissory note and up to 109,164 shares issuable in payment of
interest under the convertible promissory note.
(37) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 518,952 shares issuable upon exercise of
warrants, 518,952 shares issuable upon conversion of a convertible
promissory note and up to 186,840 shares issuable in payment of interest
under the convertible promissory note.
(38) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 342,886 shares issuable upon exercise of
warrants, 342,886 shares issuable upon conversion of a convertible
promissory note and up to 123,439 shares issuable in payment of interest
under the convertible promissory note.
(39) Issued upon consummation of the Company's debt restructuring completed on
November 27, 2001. Includes 927,000 shares issuable upon conversion of a
convertible promissory note and up to 222,480 shares issuable in payment of
interest under the convertible promissory note.
(40) Former shareholder of the Company's India.com, Inc. subsidiary.
(41) Issued pursuant to the Company's equity financing which was completed on
November 27, 2001.
(42) Former director of EasyLink.
(43) Issued pursuant to settlement of obligations under letter agreement between
EasyLink Services Corporation and George Abi Zeid relating to the proposed
acquisition of Telecom International, Inc.
(44) Former vendor of EasyLink.
(45) Former shareholder of LanSoft, Inc. EasyLink acquired LanSoft on December
30, 1999 in a merger.
(46) Issued pursuant to an employment agreement with the Company.
(47) Issued pursuant to the disposition of Elong, Inc. by the Company's
Asia.com, Inc. subsidiary.
(48) Issued pursuant to the disposition of MyIndia.com, Inc. by the Company's
India.com, Inc. subsidiary.
29
PLAN OF DISTRIBUTION
The selling stockholders may offer and sell the Class A common stock
covered by this prospectus from time to time. The selling stockholders'
pledgees, donees, transferees or other successors in interest that receive such
Class A common stock as a gift, partnership distribution or other non-sale
related transfer may likewise offer and sell Class A common stock from time to
time. The selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale. The selling
stockholders may sell the Class A common stock on one or more exchanges,
including the Nasdaq National Market, or in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market prices or in negotiated transactions.
The selling stockholders may sell the Class A common stock by one or more
of the following means of distribution:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may purchase and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus; and
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
We may amend this prospectus from time to time to describe a specific plan
of distribution. In connection with distributions of the Class A common stock or
otherwise, the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of our Class A common stock in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders may also sell our
Class A common stock short and redeliver the shares covered by this prospectus
to close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
which require the delivery to such broker-dealer or other financial institution
of the Class A common stock offered under this prospectus, which Class A common
stock such broker-dealer or other financial institution may resell pursuant to
this prospectus (as supplemented or amended to reflect such transaction). The
selling stockholders may also pledge the shares of Class A common stock
registered hereunder to a broker-dealer or other financial institution and, upon
a default, such broker-dealer or other financial institution may effect sales of
the pledged Class A common stock pursuant to this prospectus (as supplemented or
amended to reflect such transaction). In addition, the selling stockholders may
also sell the Class A common stock under Rule 144 rather than pursuant to this
prospectus if the shares so qualify for resale under Rule 144.
In effecting sales, brokers, dealers or agents engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commission, discount or concession may be deemed to be
underwriting discounts or commissions under the Securities Act. We will pay all
expenses incident to the offering and sale of the Class A common stock covered
by this prospectus to the public other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes. In the case of sales by
STD, Inc., we will pay any commissions and discounts of underwriters, dealers or
agents if the average sales price of the shares sold by STD, Inc. is below
$16.00 per share.
30
In order to comply with the securities laws of certain states, if
applicable, the Class A common stock will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Class A common stock may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in
market-making activities with respect to our common stock for the applicable
period under Regulation M of the Exchange Act prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which provisions may limit the timing of purchases and sales of the shares by
the selling stockholders. All of the foregoing may affect the marketability of
the shares.
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained or incorporated by reference
in this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered by
this prospectus, but only under the circumstances and in jurisdictions where it
is lawful to do so. The information contained in this prospectus is current only
as of its date.
LEGAL MATTERS
The validity of the Class A common stock offered in this prospectus has
been passed upon by David Ambrosia, our General Counsel. As of the date hereof,
Mr. Ambrosia owned 4,475 shares of our Class A common stock and held options to
purchase 616,031 shares of our Class A common stock.
EXPERTS
Our consolidated financial statements appearing in our Annual Report on
Form 10-K for the year ended December 31, 2000, have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon, incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. The report of KPMG LLP covering the December
31, 2000 financial statements, dated February 15, 2001, contains an explanatory
paragraph that states that the Company has suffered recurring losses from
operations since inception and has a working capital deficiency that raise
substantial doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The consolidated financial statements of The Allegro Group, Inc. appearing
in our Amendment to Current Report on Form 8-K/A, dated November 3, 1999, have
been audited by KPMG LLP, independent accountants, as set forth in their report
thereon, incorporated herein by reference. Such consolidated financial
statements are incorporated by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Asia.com, Inc. (formerly
eLong.com, Inc.) (a development stage enterprise) appearing in our Amendment to
Current Report on Form 8-K/A, dated May 26, 2000, have been audited by KPMG,
independent accountants, as set forth in their report thereon, incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. Our report dated May 24, 2000, contains an
emphasis paragraph that states the group's operations are subject to extensive
regulation and supervision by the People's Republic of China ("PRC") government.
The laws and regulations pertaining to Internet content provider businesses in
the PRC are evolving and may be subject to change.
31
The financial statements of NetMoves Corporation (formerly FaxSav
Incorporated) incorporated in this prospectus by reference to our Amendment to
Current Report on Form 8-K/A, filed on April 24, 2000, have been so incorporated
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined financial statements of Swift Telecommunications, Inc. and
Swift Comtext Ltd appearing in our Amendment to Current Report on Form 8-K/A,
dated May 9, 2001, have been audited by KPMG LLP, independent accountants, as
set forth in their report thereon, incorporated herein by reference. Such
combined financial statements are incorporated by reference in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The combined audited historical financial statements of AT&T EasyLink
Services, a fully integrated business of AT&T, incorporated in this prospectus
by reference to our Amendment to Current Report on Form 8-K/A, filed on May 9,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
32
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration fee $ 13,921
Accounting fees and expenses 14,000
Legal fees and expenses 0
Miscellaneous expenses 1,100
-----------
Total: $ 29,021
Item 15. Indemnification of Directors and Officers.
Section 145 of Delaware General Corporation Law empowers the Company to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. The termination of any cause of action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contendre or its
equivalent, does not, of itself, create a presumption that such person did not
act in good faith and in a manner that such person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
As permitted by Section 145 of the Delaware General Corporation Law,
the registrant's amended and restated certificate of incorporation, as amended
provides that a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for any breach of the director's duty of loyalty to the
Company or its stockholders; for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; for the unlawful
payment of dividends or unlawful stock repurchases under Section 174 of the
Delaware General Corporation Law; or for any transaction from which the director
derived an improper personal benefit.
The bylaws of the Company provide that the Company shall indemnify
directors, officers and employees for such liabilities in such manner, under
such circumstances and to such extent as permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended and that
the Company shall advance all reasonable costs and expenses (including
attorney's fees) incurred in defending any action, suit or proceeding to all
persons entitled to such indemnification, all in the manner, under the
circumstances and to the extent permitted by Section 145 of the Delaware General
Corporation Law, as now enacted or hereafter amended.
The Company has entered into indemnity agreements with each of its
directors and executive officers to give them additional contractual assurances
regarding the scope of the indemnification described above and to provide
additional procedural protections. In addition, the Company has obtained
directors' and officers' insurance providing indemnification for directors,
officers and key employees for various liabilities.
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At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. The registrant is
not aware of any threatened litigation or proceeding that may result in a claim
for such indemnification.
Item 16. Exhibits.
Exhibit No. Description
----------- -----------
5 Opinion of David W. Ambrosia.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of David W. Ambrosia (included in Exhibit 5).
24 Power of Attorney (set forth on signature page hereof).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in this registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in this registration statement;
II-2
provided, however, that the undertakings set forth in paragraphs (i)
and (ii) above do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be initial bona fide
offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Edison, State of New Jersey, on January 11, 2002.
EasyLink Services Corporation
By /s/ Thomas Murawski
-------------------
Thomas Murawski
Chief Executive Officer
II-4
POWER OF ATTORNEY
We, the undersigned officers and directors of EasyLink Services
Corporation, hereby severally and individually constitute and appoint Thomas
Murawski and David Ambrosia, and each of them, the true and lawful
attorneys-in-fact and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) (1) any and
all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
or instruments necessary or advisable in connection therewith, and (2) a
registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, each of said
attorneys-in-fact and agents to have the power to act with or without the others
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in and about the premises, as fully to all intents and purposes as any of
the undersigned might or could do in person, and we hereby ratify and confirm
our signatures as they may be signed by our said attorneys-in-fact and agents or
each of them to any and all such amendments and instruments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Thomas Murawski Chief Executive Officer and Director January 11, 2002
------------------------------------ (principal executive officer)
(Thomas Murawski)
/s/ Gerald Gorman Chairman and Director January 11, 2002
------------------------------------
(Gerald Gorman)
/s/ Debra McClister Executive Vice President and Chief January 11, 2002
------------------------------------ Financial Officer (principal
(Debra McClister) accounting and financial officer)
/s/ George Abi Zeid Director January 11, 2002
------------------------------------
(George Abi Zeid)
/s/ William Donaldson Director January 11, 2002
------------------------------------
(William Donaldson)
/s/ Stephen Duff Director January 11, 2002
------------------------------------
(Stephen Duff)
/s/ Stephen Ketchum Director January 11, 2002
------------------------------------
(Stephen Ketchum)
/s/ Jack Kuehler Director January 11, 2002
------------------------------------
(Jack Kuehler)
II-5
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
5 Opinion of David W. Ambrosia.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of David W. Ambrosia (included in Exhibit 5).
24 Power of Attorney (set forth on signature page hereof).
II-6